China Lends US$3.3 Billion to Ethio-Djibouti Railway project in the Horn of Africa

The Chinese government has agreed to provide US$3.3 billion in financing to the Ethio-Djibouti Railway project in the Horn of Africa.

Officials from the Export-Import Bank of China will travel to the Ethiopian capital of Addis Ababa in early May to put the finishing touches on the agreement between the finance ministers of China and Ethiopia.

The $3.3 billion loan will be used to construct a 752.7-kilometre railway between Sebeta, situated in central Ethiopia, to Negad Port in the Republic of Djibouti.

The project will be constructed in three phases, of which two of will take place on the Ethiopian side of the border with the third in Djibouti.

Chinese construction companies will be extensively involved in the project with the China Railway Engineering Corporation responsible for construction of the segment of railway line between Addis Ababa and Meiso, and the China Civil Engineering Corporation entrusted with building the Meiso-Dawalleh route.

The huge loan is part of increased efforts by China to provide financial support to emerging economies in Africa and other parts of the world in exchange for access to resources and commodities needed to fuel its own burgeoning growth.

In March, the China Development Bank, Chinaâs largest foreign investment and financing bank, executed an agreement with South African freight rail company Transnet to provide $5 billion in infrastructure funding.

The China Development Bank has provided a total of $16 billion in financing to over 30 African nations.

The Chinese government has further stated that it will provide an additional $20 billion in loans over the next three years to support the development of Africaâs infrastructure, agriculture and manufacturing sectors.

Ethio-Djibouti Railways, jointly owned by the governments of Ethiopia and Djibouti, has struggled in recent years, running annual deficits which have compelled it to seek financial assistance from international lenders.

In 2009 it was reported that no passenger service had been provided between Addis Ababa and Dire Dawa, the countryâs second largest city, while services between Djibouti and Dire Dawa were suspended completely in August 2010.